Coronavirus outbreak in China: Risks of supply chain disruption increase with time

Euler Hermes’ economists have been analyzing the impact of the coronavirus outbreak on the global economy.

The official PMIs for January released today do not yet reflect the magnitude of the economic concerns around the ongoing coronavirus 2019-nCoV outbreak in China. However, we think that its impact on the Chinese economy and the rest of the world is not negligible.

The hit to China’s GDP y/y growth could amount to c. 1pp, mostly over Q1 2020. A recovery should thereafter be possible, based on pent-up production and policy support.

A protracted pause in Chinese activity could be disruptive for certain supply chains such as chemicals, transport equipment, textile and electronics.

The top five economies potentially hit by this disruption are Taiwan, South Korea, the Netherlands, Hungary and Indonesia.